McKinsey: technology is helping to transform insurance
Insurance and technology have been connected for quite some time, primarily with the latter facilitating the operations of the former.
However, in its article ‘’, McKinsey notes that this purely functional dynamic (underwriting, claims, marketing, etc) is changing as insurers look to compete with more technologically advanced insurtech enterprises:
“Our experience with insurers that want to leap into the digital era shows that as technologies evolve, these companies may end up automating 50% to 60% of traditional back-office operations,” says the article.
Preparing for a new way of working
An increased level of automation will mean, in turn, a significant cultural reassessment for workforces; teams and individuals may become less siloed in roles and instead be trained for cross-functional purposes, thereby creating much more dynamic employees.
In addition to reskilling existing members of staff, insurance companies will also need to hire tech specialists, data scientists and people with other computer literate skillsets.
Although this will engender a great deal of change within insurance-based operations, McKinsey opines that missing out on the optimised operational efficiencies that result could be deleterious for insurers looking to retain their share of the modern market.
The first step of this digital transformation journey should be the decluttering of complex IT systems in favour of SaaS options, which can be used for daily functions such as HR admin, distribution and commission processing.
Once this has been effected, more advanced technology with specialised functions such as RPA, advanced analytics and deep learning algorithms can be employed. These can be further supplemented by IoT networks which stream and integrate vast streams of data to a central, analysable point.
“These technologies are helping digital-first companies shrink their expense ratios to almost 40% lower than those of traditional property and casualty insurers. Advances in artificial intelligence are also allowing incumbents to automate increasingly complicated tasks, including addressing all forms of customer queries.”
Focusing on the customer and collaboration
Most importantly, McKinsey advocates that whatever tech advances are introduced by an insurer must serve the customer’s interests and promote the company’s image as a provider of quick, reliable and intuitive services tailored to specific needs.
“For example, one American insurer offers a 24/7 chatbot service to help customers complete straightforward transactions, such as updating designated beneficiaries,” adds McKinsey.
A spirit of collaboration with the wider community is also highly important; remaining at the cutting-edge of service requires communication with entities which are pioneering new methods and industry perspectives. Failing to do so could quickly result in atavistic operational standards.
“Many insurers are overcoming this challenge and setting up new service models quickly by partnering with insurtechs, technology companies, and even traditional business-process outsourcing companies,” the article continues.
“These new service models significantly reduce operational expenses while often also providing additional revenue streams in the form of recurring insurance-as-a-service (IaaS) offerings.”
It is, perhaps, a foregone conclusion that the digital era will fundamentally change insurance operations. Although a new ‘standard’ has yet to emerge, taking stock of how the transformation will alter every aspect of a company - from staff to strategy - will stand insurers in good stead to making the transition successfully.